Turn Your Blood, Sweat & Tears Into Cash: A Guide To Sell Your Business

By Emery Ellinger III

You have built your business from the ground up and you are finally ready to sell. However, you might be facing three major problems:

1.       You don’t know enough qualified buyers that will pay what your company is worth.

2.       You do not ha

• Language: English
• Publisher: Aberdeen Advisors Inc
• Release date: Feb 23, 2017
• ISBN: 9780998447612

Book preview

INTRODUCTION

You Are Going to Exit This Business, One Way or the Other

You’ve spent 10, 20, 30 years or more growing your business. You hired and trained a solid management team, developed a diverse customer base, and your company is generating over $5 million in revenues. You are proud of your accomplishments; you and your family are well aware of the blood, sweat, and tears that went into building what has become your legacy. The goal you had envisioned from the start has been realized…but you never envisioned how it would end.

It may have worked for you to pull 60-hour work weeks when you were younger; that’s what it took to reach your goal, after all. Your wife supported your workaholic ways for many years—she may even have joined your team, helping out with the finances or such. But enough is enough, she has been telling you. She wants to travel and spend more time with the grandkids—and you do, too. But how do you get out of something you’ve grown to be so big? How will you continue to support your family if you retire? Who even are you, if you’re not a business owner?

Though you may have been frugal even at the height of your business’s success, have you really prepared for your retirement years? According to a 2016 statistic from The Business Insider, the average person between 56 to 61 years old has $17,000 in savings—likely not nearly enough to support your current lifestyle. Do you have a clear understanding of what your business is actually worth, and how to go about finding an ideal buyer? You have employees you want to be taken care of after you’re gone; you have a comfortable personal lifestyle you don’t want to change. How do you know when the best time to sell is? How do you know who the right person to sell to is?

These questions are on the minds of many of my clients. The truth is—very few business owners start with the end in mind. Their focus is on survival, and then growth, and more growth. Just like most people don’t like to contemplate their own mortality, business owners don’t like to contemplate the day they will no longer be in charge of their own business. But here’s the hard truth—you are going to exit this business one way or the other. The real question is, are you going to exit in the way that is most responsible—that benefits you and your family and your employees in the best way possible? Or are you going to exit the business with no plan in place, leaving your long-built legacy to die along with you?

My role is to ensure that you choose the former. Even if you’re not sure you’re ready to sell just yet, now is the time to make sure you and your business are set up to earn the highest rate, undergo the smoothest process, and reap the greatest reward.

I’m not saying it’s going to be easy—selling a business has become incredibly complex. I know, because I’ve been there—both as a business owner, and as an advisor. By the time I was in my mid-twenties, I’d built three direct-marketing companies, and sold them all successfully. But the learning process was painful. I was often intimidated and confused when terms like reps and warranties, indemnification, and reverse triangular merger were thrown across the negotiating table.

I had been under the impression that selling a business would be easy. In fact, in the last 10 years it has become harder to sell a business than ever before. Today, there is so much added litigation that needs to be managed—from human resources, to legal, to accounting. There are environmental liabilities, tax liabilities, insurance liabilities—all that if not handled properly, could affect the new buyer, and delay the sale far beyond what you had in mind. The increased risk to the buyer drives excessive due diligence on behalf of the seller. Likewise, there’s significant risk the seller has to be careful to avoid.

Three Major Myths About Selling Your Business

Myth #1: I will have no liability at closing.

Here’s an example of an environmental problem in which the seller may be held responsible. Let’s say you own a dry cleaning company; you sell your business and the property. Ten years later, there’s oil found in the sand from when you owned the property, and it leaks into the water system. The buyer is going to come to you and say, You didn’t disclose this. You should have known. This was on you. You’re going to say, You bought it. You had your chance to do due diligence.

There are going to be a lot of legal proceedings. Generally, in a situation like that, one of you could be responsible for $100 million worth of damage. Depending on the legal language used in the sale, this could be on you—even if you didn’t know about the leak, and even if the environmental consultant you had at the time had told you that everything was fine. Talk about a buzz kill to the good life of retirement! If you don’t have a lawyer involved with the sale, you could be on the hook for a number of liabilities. Don’t let that happen to you.

Myth #2: It’s going to be easy to sell my business.

This one is a big fallacy. I have Baby Boomers come into my office and say, Okay, I’m ready to sell my business. I want to sell it in three months Let me tell you what, you’re not getting a closing in three days. If you get lucky and find an ideal buyer within three days, they’re not going to be ready to sign. They’re going to come in and say to you, I want to meet your key employees. Then they’ll say, I want to meet your key customers. Then they’ll ask you for every customer contract and all the financials and all the insurance records—and they want them electronically. Many Baby Boomers—sellers now in their 60s or 70s—still have hard copies of everything. Today’s buyers will REQUIRE all of your documents be in a digital format. As you will come to learn by reading this book, you need to prepare for the sale well in advance of your goal. And it’s not going to be easy.

Myth #3: I will get all cash.

Sellers also think their business is worth a lot more than it actually is, and that they’re going to get all cash upon the sale. Of course they think it’s worth more—it’s their baby. They’ve invested the emotional sweat and often every last dollar of their profit back into the business. They know what it took to build their business, and no one is going to get away with what feels to them like theft. Often, their expectations need to be managed or corrected. Some sellers do get what they’d dreamed they’d get for their business, and some of them even get all cash—but it is more often the exception, than the rule.

You Don’t Know What You Don’t Know

It’s impossible to be a subject matter expert in every field. Lawyers and CPA’s and Merger and Acquisition (M&A) advisors are there to save you on taxes, to limit your liabilities, and to position your business for maximum value. We’re going to help you get prepared so you know what to expect, and so you can get more money for the sale. We know you’ve been frugal—the sustainability of your business depended on it. But selling your business is one of those situations where you need to spend some money to make more out of a great deal.

You can try to do it yourself, but you’re probably going to have fewer buyers. You are still running your business—you don’t have the time to do it properly, and you don’t have the expertise to achieve the results you want. Again, I know because I’ve been there. I learned the hard way, so that you don’t have to.

Since I sold my first business, I have helped hundreds of people buy and sell companies in the southeast United States. Our Firm is consistently ranked #1 in Tampa Bay in sales volume in our market. I am incredibly passionate about what I do, because I see the difference our services make in people’s lives. I watch our clients go from confused, unprepared, and misinformed to confident, relieved, and mainly overjoyed. They are grateful for their new-found freedom and proud of the legacy they have left behind.

I founded Aberdeen Advisors based on a vision to provide mid-market business owners superior results when they sell their businesses. We find the right buyers to help business owners get the highest sales price for their companies. I’m very passionate about the mid-market because when I sold my first mid-market company, I wish I’d had the support of a firm like Aberdeen. At Aberdeen, we focus on companies with revenues from $5 million to $100 million. We have structured our staff and managed our company to out-perform our competition on a consistent basis. We are committed to providing serious results for serious sellers. We do this in three ways: higher sales prices and stronger than average offers, unmatched closing rates, and faster closing times.

You may be surprised to know that only about 25% of businesses put on the market actually result in a closed sale. But at Aberdeen Advisors, our overall closing rate is 83%, and we have sold every single manufacturing client we’ve ever worked with. We deliver such consistent high performance because of our process. We know that finding just any buyer is not enough. We must find the ideal buyer to generate the best results—and in order to achieve that, we have to identify multiple ideal buyers. By finding these buyers, we are able to create competition for your business, which ultimately results in higher and better offers for you.

You may be thinking, How much is my company worth? Who is likely to buy it? How long will it take to sell? If you’re serious about selling your company, keep reading. I will tell you everything you need to know to maximize cashing out and to turn your migraines into